Good News on Listing | Frost & Sullivan Assists Anhui Conch Materials Technology Co., Ltd. to Successfully List on the Hong Kong Stock Exchange (2560.HK)

Anhui Conch Materials Technology Co., Ltd. (hereinafter referred to as 'Conch Materials Technology') successfully listed on January 9, 2025. The company plans to issue 14,497,400 H shares, of which 90% will be international offerings and 10% will be public offerings. The maximum offering price per share is HK$3.3, raising a net amount of approximately HK$435 million.

During the process of listing in Hong Kong this time, Frost & Sullivan mainly undertook the following tasks: helping the issuer accurately and objectively understand its positioning in the target market, using objective market data to discover, support and highlight the issuer's competitive advantages, assisting the issuer, investment banks and other intermediaries in completing the writing of relevant parts of the prospectus (such as overview, competitive advantages and strategy, industry overview, business and other important chapters), helping the issuer complete communication with the Hong Kong Stock Exchange and investors, assisting investors in quickly understanding the market ecosystem and competitive landscape, and assisting the issuer in completing feedback on various industry-related issues from the Hong Kong Stock Exchange, etc.

• The company is a leading cement admixture supplier in China, integrating R&D, production, sales, and technical support;

   

• R&D efforts have enabled the company to maintain an industry-leading position in China;

   

• Establish stable cooperative relationships with upstream and downstream partners, effectively reduce production costs, ensure supply, and achieve business growth;

   

• The production process is advanced and mature, with strict quality control procedures that meet the unique needs of customers, ensuring excellent product quality and reliable reputation;

   

• An experienced management team with visionary leadership and outstanding execution capabilities.

According to the Frost & Sullivan report, the company:

• Based on the sales volume and revenue of cement admixtures for fiscal year 2023, the company ranks first in China, with market shares of approximately 28.3% and 32.3%, respectively;

   

• Based on the sales volume and revenue of cement admixtures for fiscal year 2023, the company ranks first in China, with market shares of approximately 34.6% and 34.1% respectively;

   

• In fiscal year 2023, the company's sales of concrete admixtures accounted for approximately 0.8% of China's total concrete admixture sales, while its revenue from concrete admixtures in fiscal year 2023 accounted for approximately 0.6% of China's total concrete admixture revenue.

Cement admixtures mainly refer to additives added to cement during the production process, including cement grinding aids, flue gas desulfurizers, denitrifiers, coal-saving agents, raw material sulfur-fixing agents, etc. According to a Frost & Sullivan report, from 2019 to 2023, China's cement admixture production decreased from 1,002.0 thousand tons to 969.3 thousand tons, with an annual compound growth rate of -0.8%. In 2022 and 2023, production declined mainly due to reduced demand in the downstream cement market due to regulatory policies affecting the real estate industry. In the future, as the Chinese government increases investment in infrastructure construction, growth in the cement market is expected to further drive demand for cement admixtures. By 2028, China's cement admixture production is expected to steadily grow to 1,123.5 thousand tons, with a compound annual growth rate of 3.0% from 2023 to 2028.

According to the Frost & Sullivan report, with continuous industry integration, the number of market participants in China's cement admixture market has gradually decreased, while market concentration has been continuously increasing. According to the Frost & Sullivan report, based on the sales volume of cement admixtures in 2023, the top five market participants in China accounted for about 49.6%, with the Group ranking first and holding a market share of about 34.6%. Based on the sales amount of cement admixtures in 2023, the Group ranked first in China, holding a market share of about 34.1%. In addition, based on the sales volume of cement admixtures in 2023, the top five market participants in China accounted for about 41.2%, with the Group ranking first and holding a market share of about 28.3%.

●Policy Support

A series of policies and measures, including urban infrastructure, government-subsidized housing projects, agricultural facilities and new rural construction, as well as the implementation of major projects such as nuclear power, water conservancy and high-speed rail, and the 'Belt and Road' initiative, have promoted the development of infrastructure construction, building construction and rural development, stimulating an increasing demand for cement admixtures. As of December 31, 2023, more than 150 countries have participated in the 'Belt and Road' initiative, cooperating in areas such as policy, infrastructure, trade, finance, etc., providing broad development opportunities for domestic construction enterprises to participate in the infrastructure construction of relevant countries such as highways and railways. In addition, the National Development and Reform Commission updated the 'Catalogue of Industries for Structural Adjustment' in 2019, adding 'Development and Application of Cement Admixtures' to the encouraged category of the catalogue, promoting the development of China's cement admixture market.

● Awareness of energy conservation and emission reduction is increasing

As a high-energy-consuming industry, the cement market places greater emphasis on energy conservation, emission reduction, and environmental protection. Cement admixtures can be used to improve cement grinding efficiency, reduce clinker usage, and lower cement production energy consumption, helping to achieve energy conservation and emission reduction goals. Therefore, as cement producers pay more attention to energy conservation and emission reduction, their demand for cement admixtures will continue to increase.

●Market integration

With the transformation and upgrading of the industry and intensified market competition, small cement admixture producers have gradually withdrawn from the market due to low product quality and profitability. Leading cement admixture producers possess sufficient funds to expand production scale for economies of scale, have strong R&D capabilities to meet the growing product performance and quality requirements, and effectively control costs and enhance profitability through a full value chain business layout and supplier management. Therefore, leading producers can continuously increase market share, thereby promoting industry integration in the Chinese cement admixture market.

●Value chain extension

To effectively control production costs, leading cement admixture manufacturers are committed to expanding their business into the upstream raw material production sector, such as alkydamines, in order to reduce the impact of raw material price fluctuations on cement admixture prices and improve profit margins. In addition, cement admixture manufacturers that achieve a full value chain business layout can not only supply cement admixtures to cement producers but also to other cement admixture manufacturers, further enriching their revenue sources.

● Expand nationwide layout

Affected by limited transportation radius, transportation costs, and differences in cement performance across regions, cement admixture producers tend to set up their production and supply near downstream cement producers. To cover more target markets and enhance market influence, leading cement admixture manufacturers continuously expand their national layout, thereby better and faster meeting the needs of cement producers in various regions and thus capturing more market share.

●Strategic cooperation with cement producers

In addition to expanding their national layout, leading cement admixture manufacturers also develop their business by jointly establishing factories with large cement producers or establishing strategic direct supply partnerships. This requires them to have competitive advantages in terms of production scale, product quality, production technology, and supply channels. Achieving strategic cooperation is beneficial for cement admixture manufacturers to enhance their competitiveness.

According to the national standard GB/T 8075-2017, concrete admixtures refer to materials added before or during mixing of concrete, other than cementitious materials, aggregates, water, and fibers, which are used to improve the performance of fresh concrete and/or hardened concrete without harmful effects on humans, biological organisms, or the environment. Currently, the supply and demand in China's concrete admixture market remain stable, with producers usually formulating production plans based on market demand. From 2019 to 2023, China's concrete admixture production decreased from 2.0 million tons to 1.61 million tons, with a compound annual growth rate of -5.3%. During the same period, China's concrete admixture consumption decreased from 1.98 million tons to 1.58 million tons, with a compound annual growth rate of -5.5%. In 2022, affected by the economic downturn, concrete production significantly decreased, leading to a decline in both concrete admixture production and consumption. With the recovery of the macroeconomy and increased investment in infrastructure construction, it is expected that by 2028, China's concrete admixture production will grow to 1.86 million tons, with a compound annual growth rate from 2023 to 2028 of 2.9%. At the same time, China's concrete admixture consumption is expected to grow to 1.81 million tons in 2028, with a compound annual growth rate from 2023 to 2028 of 2.8%.

Concrete admixtures are the most widely used concrete additives. By product category, concrete admixtures account for about 71.0% of production. In recent years, due to their excellent performance, polycarboxylate admixtures have seen a continuous increase in market share. By production volume, polycarboxylate admixtures accounted for about 84.9% of the total concrete admixture production in 2023, while high-efficiency admixtures and ordinary admixtures accounted for about 14.7% and 0.4% respectively. In the future, it is expected that the proportion of polycarboxylate admixtures will continue to increase, while ordinary admixtures will gradually be phased out.

According to a Frost & Sullivan report, the concrete admixture market in China is quite fragmented. As of December 31, 2023, there were approximately 4,000 concrete admixture producers in China. In terms of sales volume of high-performance admixtures in 2023, the top five market participants in China accounted for about 38.7%. In terms of sales volume of high-performance admixtures in 2023, our group accounted for about 1.3% of the total sales volume of high-performance admixtures in China. In terms of sales volume of concrete admixtures in 2023, our group accounted for about 0.8% of the total sales volume of concrete admixtures in China.

● Downstream demand continues to grow

The development of the concrete admixture market is mainly influenced by downstream demand. In recent years, China's infrastructure investment has increased from RMB 1.51 trillion in 2019 to RMB 1.76 trillion in 2023, with a compound annual growth rate of 3.9%. In 2022, the National Development and Reform Commission and the Ministry of Housing and Urban-Rural Development issued the '14th Five-Year Plan' for national urban infrastructure construction, proposing development goals for building a high-quality urban infrastructure system during the '14th Five-Year Plan' period. It is estimated that by 2028, China's infrastructure investment will reach RMB 2.09 trillion, with a compound annual growth rate of 3.5% from 2023 to 2028. The continuous advancement of infrastructure construction will promote the stable development of the concrete market, thereby stimulating a steady growth in the demand for concrete admixtures.

● The proportion of manufactured sand and gravel continues to rise

Due to the shortage of natural sand and gravel resources caused by excessive and disorderly mining, the use of manufactured sand and gravel has been increasing in recent years. Compared to natural sand and gravel, manufactured sand and gravel have rough surfaces and many edges and corners. When mixing concrete with the same slump, the water requirement per cubic meter of manufactured sand and gravel increases by 10 to 20 kilograms. Therefore, concrete prepared with manufactured sand and gravel has a greater demand for water reducers. In addition, manufactured sand and gravel have higher requirements for the water reduction rate and air-entraining ability of water reducers. As a result, the increase in the use of manufactured sand and gravel will drive the rapid growth in the demand for concrete water reducers, especially high-performance ones.

● Industry concentration continues to rise

With the implementation of environmental protection policies and the policy of relocating factories to the suburbs, the development of small and medium-sized concrete admixture producers has been restricted. Some have been forced to close down and exit the market. In addition, large concrete producers tend to establish long-term strategic cooperation with concrete admixture producers with large production capabilities, so leading concrete admixture producers will continuously increase their market share. In the future, with the continuous expansion of the scale of industry-leading enterprises and the exit of small and medium-sized producers, the concentration of the Chinese concrete admixture market will further increase.

●The increasing demand for high-performance water reducers

Compared with high-efficiency water reducers and ordinary water reducers, high-performance water reducers have a higher water reduction rate and good concrete fluidity retention capabilities. They can produce high-strength and durable concrete, suitable for various construction environments and special engineering requirements. In addition, the synthesis process of high-performance water reducers does not produce waste liquid, waste gas, or waste residue, making it more environmentally friendly than other water reducers. Therefore, as the demand for high-performance water reducers increases day by day, the market share of high-performance water reducers will further expand.

●Technical improvement

China's cement varieties are complex, and the physical properties of sand, gravel materials, and mineral admixtures also vary greatly. To ensure the stability of concrete performance, concrete admixture manufacturers need to adjust the formula of concrete admixtures according to the ratio of other components in the concrete, or produce concrete admixtures by custom compounding the mother liquid according to customer requirements. Therefore, with the increasing demand for customization and the continuous improvement of product performance requirements, the technical level of concrete admixture manufacturers will also be rapidly enhanced.

Frost & Sullivan has extensive research experience in the chemical and materials industries, assisting well-known enterprises in successfully listing on capital markets. Successful listings include: Qiangbang New Materials (001279.SZ), Migao Group (9879.HK), Jihai Resources (2489.HK), Zhongbao New Materials (2439.HK), Shengneng Group (2459.HK), Jinli Yongci (6680.HK), Avia Avian (IDX: AVIA), Global New Materials (6616.HK), Dafeng Equipment (2153.HK), Yihai International (8659.HK), GHW (9933.HK), Sanhe Fine Chemicals (0301.HK), Xingyu Holdings (2346.HK), Xinghe Holdings (1891.HK), Xuyang Group (1907.HK), Long Resources (1712.HK), Shandong Gold (1787.HK), Henan Jinma (6885.HK), Xingye New Materials (8073.HK), Dongguang Chemicals (1702.HK), Zhongqi Group (1932.HK), Xinbang Holdings (1571.HK), Meigu Technology (8349.HK), Huajin International (2738.HK), Flater Glass (6865.HK), Dinos (1452.HK), Caike Chemicals (1986.HK), Chang'an Renheng (8139.HK), Sansida (1337.TWSE), Born NYSE, CPC NYSE, Gu NYSE, Tianhe Chemicals (1619.HK), Yihua Holdings (2121.HK), Sijia Group (1863.HK), and others.